East Loop apartment tower near groundbreaking

(Crain's) — Developers Tony Rossi and Tom Moran are getting ready to break ground on a 332-unit apartment tower in the East Loop, the ninth new rental project in a downtown construction wave that will test the market in the coming years.

Demolition crews have been tearing down existing buildings to make way for the new 42-story luxury apartment high-rise at 73 E. Lake St., and the developers are wrapping up the paperwork for their construction financing, says Mr. Rossi, president of Chicago-based M&R Development LLC.

“We hope to have it buttoned up at the end of this month or the first week in June,” he says.

Mr. Rossi declines to disclose the project's lender or the size of the construction loan. In an earlier interview, he said the building would cost $116 million, or about $349,000 a unit. The venture Messrs. Rossi and Moran formed to build the tower acquired the development site in April for $12.2 million, county records show.

The project, called Summit on Lake, is the latest entrant in a downtown apartment building boom that began last year, spurred by rising rents and occupancies — and soaring apartment values.

Yet the new building could add to concerns among some observers that the supply of units will outstrip demand, making life harder for landlords starting next year. Developers will add more than 7,200 apartments to the downtown market between now and the end of 2014, according to a recent report from Chicago-based consulting firm Appraisal Research Counselors.

“Deliveries in 2013 and 2014 will pose challenges to the rent and occupancy levels of existing buildings,” the report says.

Mr. Rossi isn't concerned yet, saying he thinks the market can absorb 2,000 to 3,000 units a year. But existing buildings could have a hard time competing with the new ones, he says. Many of the new projects could have an edge by offering condo-style amenities and finishes. Summit on Lake, for instance, will have a rooftop deck and a party room, Mr. Rossi says.

Among the new apartment buildings under construction, just two will open this year: the 324-unit Sono East on the edge of Lincoln Park, and 1225 Old Town, a 250-unit project in Old Town. The other six projects under way will wrap up in 2013.